Commentary on Canadian Labour and Employment Law Issues

January 15, 2014

Progressive discipline and performance management is part of the employment relationship. It’s a part that most managers and employees would like to avoid. But it’s reality and critically important to business and individual success.

This was a discharge case. The grievor, a yardman, was terminated as a result of a violation of the Company’s Code of Conduct. Specifically, the grievor was discharged for violating the employer’s personal protective equipment (“PPE”) policy. He had, on his record, a “Stage 2 discipline (written warning) for not following the Employer’s PPE policy, in particular not wearing a hard hat in areas of the plant that required him to have one on.” This was not grieved.

There was a requirement to wear a hard hat while driving the forklift. It seems that the policy “…. was ill considered and stupid in so far as it applied to him when he was driving the forklift.” and he voiced this concern. The arbitrator described the matter as follows:

What emerges is that, despite his performing well on the job, the grievor did not like wearing a hard hat, and once the new stricter policy was introduced, took it upon himself to resist the policy by refusing to comply when it suited him not to……

The grievor’s attitude at the time was aptly summed up in his own words. He concedes he was “upset, frustrated, pig-headed” and, as a consequence had decided to “push the boundaries on this”. In short, while he understood the company’s policy, he felt it appropriate to resist its application in his case in the hope it might change, or his non-cooperation might go unchallenged. However, in the end he learnt the truth of the old Russian proverb “Man who kicks the world hurts his foot”.

In the week leading to his termination, the grievor was seen “a couple of times on the same day without wearing his hard hat when told to do so”.

A meeting was convened between the union representative, the grievor and the Company’s HR representative. Following that meeting, the employer continued to believe that the grievor had not changed so far as the PPE was concerned. The Company terminated the grievor’s employment the following week (thus going from a written warning to termination).

The main issue in this case was whether “ the Employer was contractually obliged, by Article 31.02, to use progressive discipline in the form of a suspension before resorting to termination.” Article 31.01 and 31.02 provide as follows:

31.01 The parties recognize the importance of undertaking pro­gressive disciplinary action to address job-related behavior in the event that an employee is not meeting expected performance standards, with the objective of correcting behavior and improving employee performance.

31.02 The Employer will ensure that a progressive disciplinary action process is in place and applied consistently. This process includes a series of progressive corrective steps (based on the severity of the behavior or conduct in question) to address employee performance concerns or specific incidents. (emphasis in award)

The Arbitrator reviewed a number of cases and authorities dealing with progressive discipline and considered the Collective Agreement and concluded:

By Article 31.02, the Employer has committed itself to the use of a progressive discipline process. That process is well understood. The Employer has a policy that reflects customary practice. The “progressive” in progressive discipline does not simply mean well intentioned or enlightened, it means sequential, with (absent exceptional circumstances) escalating punishment imposed for corrective purposes. The Employer here chose, out of understandable frustration over the grievor’s challenging conduct and attitude, self-described as “stupid and pigheaded”, to skip the customary suspension that would usually follow a written warning and proceed straight to termination.

The concept of industrial discipline and the use of the suspension recognizes that employees can sometimes be stubborn and irrational, and sometimes they can fail to act on the warnings and guidance, however supportive and well intentioned, they receive. A suspension, particularly one of several days, is both real punishment and the clearest warning that the employee is close to termination. Sometimes conduct does not change until that point is reached. But once it is, they often do change. If they choose not to, then termination often follows.

The Arbitrator concluded that it could not be “reasonably said” that, on the facts of the case, “a suspension would have been pointless or ineffective.” Termination was “not the only viable option”. As such, a suspension was called for.

The union here negotiated a provision into the collective agreement that required the employer to consistently use progressive discipline and “moving straight to termination”, in this case, was a “breach of that commitment”. It seems that, even if the language was not in the collective agreement, the arbitrator would have found that the discharge was excessive based on a variety of mitigating factors.

Significance

I suppose the broad significance of this decision for employers is to highlight that they should understand that collective agreement language limits their ability to manage their business. Don’t just include language in the collective agreement blindly. Consider the significance of the language, the implications and how it will limit or restrict the ability of the employer to manage the business.

More directly, the case emphasizes the need to exercise patience when disciplining. On the facts of the case, it is clear that the employer was frustrated by the grievor’s intransigence and resistance to its directives.

As an employer, simply based on the facts reported in the case (including the “challenging conduct” described in the decision), would you have gone to termination, or would you have imposed a suspension?

January 13, 2014

The Supreme Court of British Columbia recently considered this in Hooge v. Gillwood Remanufacturing Inc., 2014 BCSC 11 (CanLII). They also considered whether the laid off employees refusal to accept a recall amounted to a failure to mitigate.

The plaintiff began his employment at the Mill, as a labourer, in 1975. He worked his way up to become the production supervisor. Despite several changes in ownership, the plaintiff continued to work as production supervisor. On August 6, 2011 the plaintiff was informed that he would be laid off effective on August 12, 2011. His lawyer wrote to the defendant on August 25, 2011 taking the position that the plaintiff had been constructively dismissed and was entitled to reasonable notice of termination.

The plaintiff commenced an action on September 12, 2011. The defendant recalled the plaintiff to work effective on September 19, 2011. The defendant refused the recall and did not return to work. As of the date of trial (April 29, 2013), the plaintiff had not found other employment.

The defendant took the position that the layoff did not constitute a constructive dismissal and, further, that the plaintiff failed to mitigate his alleged damages by accepting the recall on September 19, 2011.

There is nothing more fundamental to a contract of employment than that the employee be employed and that he be paid for his services. Doman unilaterally changed those fundamental terms. One can appreciate the need for employers to cut down on management or supervisory staff during economic downturns but the employee, subject to contractual arrangements, is still entitled to reasonable notice or payment in lieu of notice.

The Court found that there was “nothing to suggest that there was a term of the contract of employment, either express or implied, which provided for layoffs of salaried employees, and it is clear that the plaintiff did not accept the lay-off.”

… In my view, the Act does not grant all employers the statutory right to temporarily lay off employees, regardless of the terms of their employment contract. Rather than creating new rights, the Act appears to be qualifying employment agreements in which the right to lay off already exists. Therefore, unless the right to lay off is otherwise found within the employment relationship, the above cited sections of the Act are not relevant.

The Court held that the plaintiff was entitled to a reasonable notice period of 18 months.

The law is clear that in certain circumstances an employee who declines an offer of re-employment from the same employer after having been dismissed, whether actually or constructively, may be found to have failed to mitigate his damages, and have any award reduced on account of such failure to mitigate. The employer has the onus to prove the offer to re-employ, and that a reasonable person in the position of the plaintiff would have accepted the offer.

* * *

Where an employee is dismissed from his or her employment, whether expressly or constructively, and the employer then makes an offer to re-employ, the employee faces a difficult decision. As the law recognizes, it may be difficult for the employee to return to the same or a similar job after he or she has been fired or constructively fired, but the question of whether or not it is reasonable to accept the offer will be determined on an objective basis, albeit a reasonable person in the employee’s position.

And the Court, following a detailed review of the evidence regarding mitigation made the following helpful observation:

Even if the offer to re-employ was motivated by a desire to avoid the payment of damages in lieu of severance, that does not make it reasonable to decline the offer. It seems to me that an employer who has laid-off an employee, or wrongfully terminated an employee without due notice, may very well come to the conclusion, particularly with the benefit of legal advice, that its actions constituted a wrongful dismissal and may seek to mitigate its own exposure to the payment of damages by offering to re-hire the employee. [Emphasis added]

Ultimately the Court found that the plaintiff failed to mitigate when he declined the recall to return to work. That being said, the defendant conducted further restructuring after the plaintiff’s recall which, the Court found, would have resulted in his termination in June 2012.

So, the defendant was liable in damages for the losses suffered by the plaintiff between August 12, 2011 (the effective date of the layoff) and September 19, 2011 (the date the plaintiff was recalled to work - which recall was refused). He was also awarded damages for the period from July 1, 2012 (the date he likely would have been terminated) and February 21, 2013 (the end of the reasonable notice period).

Significance

Again, the case is important as a further brick in the Evans wall. As the Court correctly points out, a terminated employee (irrespective of the motivations of the employer in doing so) who is offered re-employment with the employer is, indeed, in a difficult position: return to the same employer who fired you or reject the offer and face a “failure to mitigate” argument. While there are circumstances where a terminated employee can refuse an offer of re-employment with the same employer, those circumstances are fairly limited (albeit driven by the facts). Constructive dismissal cases are "high risk" for employees, in most cases.

This is a pretty helpful case for employers, though supports that a layoff can amount to a constructive dismissal depending, of course, on the circumstances.

Employers often require a doctors' note substantiatiating an employee absence from work on medical grounds. This is a complicated subject, in some cases, as employers don’t want to be “big brother” particularly where the employee has a good attendance record. However, that is not always the case and, at a point, the employer might be suspicious or otherwise concerned, and require that the employee provide a medical note confirming that the absence was, indeed due, to medical reasons.

This is a topic deserving of much more than a short blog post and the complexities are wide and deep and potentially costly. Each situation, including whether the employee is unionized or not, must, of course, be assessed on its own merits and, as in so many cases, there is no “one size fits all” solution. When in doubt get legal advice (and that’s not a public service announcement for the legal profession - in it simply good business).

Employers should encourage workers to stay home when sick - not require sick notes which has a discouraging effect and forces patients into the doctor’s office when they are sick, which only encourages the spread of germs to those in the waiting room, who in some cases are more vulnerable. People such as children, seniors and those living with chronic diseases are more susceptible to the flu and are at a greater risk from its complications.

Employers, I think, would not take issue with part of this - specifically, that if an employee is sick, they should stay home. I may be wrong with that assumption, but I don't think I am.

However, in an employment setting, depending on the circumstances, employers might legitimately require a medical note substantiating the veracity of the absence including that it was for medical reasons. Further, medical notes might be necessary in order to determine whether the employer can meet its statutory obligations (for example, under the Human Rights Code).

The world is not perfect, and we do we operate in laboratory conditions. Maybe the message is that employers should act on a case by case basis in deciding whether to request a doctor’s note from an absent employee? Applying policies and procedures blindly, without regard to the individual circumstances, generally creates problems. But to go the other way and simply say that employers should “not require sick notes” of its employees is likely too “black and white” a position for the grey world we live in.

January 08, 2014

I had meant to post something about a short Statistics Canada article that was released in November 2013 entitled Long Term Trends in Unionization. The authors looked at unionization rates in Canada from 1981 to 2012. The Overview provides a good summary of the findings. These statistics identify some interesting trends and no doubt will inform the way in which unions go about trying to add to their ranks.

Employers (particularly those in certain sectors) would be well advised to keep an eye on these developments and take measures to address, in a proactive manner, different and more assertive union strategies that try to turn their ship.

January 07, 2014

Another year, another case dealing with the enforceability of restrictive covenants. This time, the Ontario Superior Court considers the matter in A Big Mobile Sign Company Inc. v. Marshall, 2014 ONSC 16 (CanLII) and granted an interim injunction based on an executed License Agreement between the plaintiff and defendant - it would seem that the relationship is not one of employment, though that is not clear.

The terms of the Non-Competition Covenant are set out in Schedule B to the Agreement and provides as follows:

[the defendant] acknowledges that the terms and conditions of the restrictive covenants are reasonable for the protection of the plaintiff's business, including the protection of confidential information and goodwill;

[the defendant] acknowledges that the consideration provided for in the Agreement is sufficient to fully compensate her for agreeing to such restrictions; and

in the event of a breach of the restrictive covenants by [the defendant], the plaintiff shall be entitled to apply for injunctive relief in addition to other remedies.

Following unsuccessful negotiations of an extension to the Licensing Agreement, the defendant delivered a letter “advising that the Agreement would not be renewed. However, she attempted to dictate her own terms for terminating the Agreement.”

The Court applied the usual analysis with respect to the enforceability of these provisions found in RJR-MacDonald Inc. v. Canada, 1994 CanLII 117 (SCC), namely the “threefold test”:

whether the applicant has presented a serious issue to be tried;

whether the applicant would suffer irreparable harm if the application were refused; and

an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.

In discussing the need to prove a strong prima facie case, the Court observed that:

The granting of an injunction would effectively terminate [the defendant’s] involvement in the mobile sign industry, pending any further decision that may be made on the enforceability of the restrictive covenants. In Quizno’s Canada, Perell J. explains his adoption of a "strong prima facie the case" to mean "a showing of a strong case with a high although not absolutely assured likelihood of success based on the material presently before the court": para. 42.

The Court found, on the evidence, that a strong prima facie case had been shown. The defendant “acknowledged the reasonableness of the terms of the restrictive covenants; although she stated that the Agreement was entered into without the benefit of legal advice, she does not give evidence that raises any grounds to set aside the Agreement. She has acknowledged receiving adequate consideration in exchange for her non-competition.”

So, notwithstanding that the Agreement was entered into without legal advice, on the evidence, this was not sufficient (absent more) to vitiate the enforceability, on an interlocutory basis, of the restrictive covenant. The company that the defendant planned to operate under was a competitor of the plaintiff.

The Court then went on to consider the evidence:

There is clear evidence that she is attempting, at a minimum, to lure "West's" customers to continue to use her services after she is done operating under the plaintiff's trade name. But in fact, there are no "West's" [the name that the plaintiff permitted the defendant to use while carrying out business activities governed by the Agreement] customers. There is nothing in the Agreement that gives rise to any right on the part of [the defendant] to consider client lists her as her own property, or to retain customers after the termination of the Term. A straightforward reading of the Non-Competition Covenant makes clear that she is not to solicit or entice any of the plaintiff's customers for the provision of services which are the same as, or similar to, or competitive with the plaintiff within 100 miles of a certain point. Finally, the injunctive relief requested is no more intrusive than that required under the terms of the Agreement upon expiration of the Term.

In terms of “irreparable harm” the Court found that “it is obvious” that soliciting customers to divert business to an existing or potential competitor could have irreversible consequences to the plaintiff’s business and, further, that this “is exactly the type of harm that the restrictive covenants were intended to protect against”.

The balance of convenience was found to favour the plaintiff and the granting of the interlocutory injunction. The Court commented:

The balance of convenience favours the injunction to ensure that Marshall does not continue to interfere with the plaintiff's customers, or to use the plaintiff's trade name to do so, and to help to ensure that she does not use the plaintiff's trade name to make derogatory comparisons to competitors as she is now doing.

The interim injunction was granted and the matter adjourned to January 14, 2014 ”for a review of the injunction on further and better material”.

While the test that the plaintiff has to meet to be granted an injunction is a probing and high one, it is not insurmountable. The evidence, in the end, will govern the outcome. Notwithstanding this, Courts in Canada continue to require clear evidence of the reasonableness of such provisions - a couple of relatively recent cases are Trapeze Software Inc. v. Bryans, 2007 CanLII 1882 (ON SC), IT/NET Inc. v. Cameron, 2006 CanLII 912 (ON CA) and Rhebergen v. Creston Veterinary Clinic Ltd., 2013 BCSC 115 (CanLII) (for a discussion or penalty vs. genuine pre-estimation of damages).

January 02, 2014

The New Brunswick Court of Queens Bench considered this in Parent v Spielo Manufacturing Incorporated, 2013 CanLII 83647 (NB QB). The employee was terminated ostensibly for just cause. She sued, arguing that the employer did not have just cause, but that she was terminated because she was experiencing health issues and because she had responsibilities caring for her special needs child which required, she argued, the employer to accommodate her.

The employer argued, according to the court, that the incompetence related to her “inability to carry out duties and substandard work, which persisted after numerous warnings”. Performance standards were set by the company and a review process was specified. These were company wide. Essentially, this was a performance management process.

A performance evaluation was done of the plaintiff on December 15, 2008. She met expectations (3.88 out of 5).

On or about July 8, 2009 the plaintiff gave birth to a son who had some health issues. She returned to work from her maternity leave in July 2010 and explained to her supervisor the challenges her child was experiencing and how they could handle the plaintiff’s regular absences from work to bring her child to appointments (as frequently as five times per week). According to the Court:

… [the company] agreed that she would have more flexible hours than anyone else employed by [the company] to accommodate her and allow her to go with her child at his doctor’s appointments. However, she would have to meet the objective standards of performance set for all employees. [The Plaintiff] had made it clear, with reason, that her son’s health was to come first and [the company] rightly understood.

In December 2010 she was given a further review and scored 2.94 out of 5.

In February 2011 at a meeting with her supervisor, she was told that she did not meet the “three point mark”, a three month performance review plan was discussed, and she was told that a further meeting would be held in three months time.

In May 2011, at the planned meeting, the plaintiff was informed that she did not meet expectations and she was given a written notice of her 30 day performance plan. There were three (3) points of improvement identified.

On June 21, 2011 she was provided with a letter as follows:

As a result of the above issued, I feel that I must now emphasize in writing how important it is for you to understand and address these issues. This is not something I do lightly or without a considerable amount of thought.

Immediate improvement is required and you will be expected to maintain the improvement in the above-mentioned areas, or you will be subject to further corrective action, including possible termination of employment. During the next 60 days we will meet once a month to discuss your progress related to these issues. You will maintain a daily activity log that will be emailed to me at the end of each work week (Friday’s at 5:00 pm).

A similar notice was delivered on August 24, 2011.

At year’s end, her performance was assessed at 2.78 out of 5. Prior to that meeting, however, the plaintiff provided the employer with a letter from her doctor advising “that she would get surgery on February 10 and would be off work for six consecutive weeks.” It would seem that the performance review was not delivered prior to her leave. Upon her return on March 19, 2012, the plaintiff was given a copy of her performance review, which she had failed, and advised that her employment with the company was terminated effective immediately.

The Analysis

Many employees and employers are rightly cautious about terminating an employee who is absent on a medical leave or returning from a leave. This introduces a dynamic into the termination decision that is simply not present in the run of the mill discharge case.

The Parent case, and others, establish that while caution is called for, it remains possible to terminate a “high-risk” employee (even for just cause).

To state the obvious - the employer bears the onus of proving/establishing just cause on a balance of probabilities. Incompetence is not the same as dissatisfaction with the performance of an employee.

The Court distinguished between just cause based on incompetence (e.g. she is incapable of performing the work) and negligence or lack of diligence (e.g. consistently failing to meet a reasonable performance standard). In that regard, see, for example, Radio CJVR Ltd. v. Schutte, 2009 SKCA 92 (CanLII).

The Court in Parent discussed what must be established by the employer:

1) The level of job performance that it required and that the level required was communicated to the employee.

2) That it gave suitable instruction to the employee to enable him to meet the standard.

3) That the employee was incapable of meeting the standard.

4) That there had been a warning to the employee that failure to meet the standard would result in his dismissal (Van Houwe v. Intercontinental Packers Ltd. reflex, reflex, (1987), 59 Sask. R. 178 (Q.B.)).

It is also well established that where an employer relies on a series of inadequacies or inappropriate conduct short of dishonesty as grounds for summarily dismissing the employee, the employer must have previously informed the employee of his or her inappropriate conduct or inadequate performance and have warned the employee that she or he must correct the noted problems within a reasonable specified time or face dismissal. The essential elements of the requisite warning are set out in Wrongful Dismissal Practice Manual….They essentially provide for the following:

(a) the employer must provide reasonable objective standards of performance for the employee in a clear and understandable manner;

(b) the employee must have failed to meet the employer’s reasonable standard of performance;

(c) the employer must give the employee a clear and unequivocal warning that she or he has failed to meet the requisite standard, including particulars of the specific deficiency relied on by the employer;

(d) the warning must clearly indicate that the employee will be dismissed if he or she fails to meet the requisite standard within a reasonable time.

Following a review of the evidence in Parent the judge concluded as follows:

Given her failure to improve after having been given ample occasions to do so, her employer was entitled to make the decision that it was unlikely that [the plaintiff] could eventually return to her past performance capacity, during which period she met the performance standard. I find this decision to be reasonable on the part of [the Company].

***

It seems clear that [the plaintiff] was not listening to the constant message that she had to improve her performance to maintain employment at [the company], otherwise she would be dismissed.

However, the Court looked at the timing. From August 24, 2011 until her termination in March 2012, there had been no issues with plaintiff’s performance that were communicated to her. Further, the December 2011 unfavourable performance review was not reviewed with the plaintiff before she left for surgery and the dismissal was only delivered upon her return to work in March 2012. The Court observed:

I believe that this delay was intentional on [the company's] behalf for obvious reasons. This decision for her dismissal was taken upon the last review being completed and this surgery had no bearing on her dismissal.

The evidence does not, in any way, support [the plaintiff's] personal issue, such as her son’s illness, as having been a consideration or a concern to [the company] in her dismissal.

The plaintiff could have, daily, brought any concerns to her supervisor but never did.

Importantly, the Court commented that the performance standards were not arbitrary or unattainable.

The Court found that the plaintiff’s employment was terminated for just cause and that she was therefore not entitled to damages on account of reasonable notice at common law.

Significance

The significance of this case for employers is obvious. Just cause is difficult to establish - I don’t think anyone (even a management labour and employment lawyer) would deny that. However, proving just cause for termination, while difficult, is not impossible even when faced with a high risk situation (as was present in Parent).

Diligence, patience, perseverance, reasonableness, documentation and honest communication and follow up will certainly maximize the chances of success when challenged. While these best practices are always important, they are particularly so when the equities might favour the terminated employee.

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